“Don’t look for the needle in the haystack. Just buy the haystack!”
Index investment funds are simpler and vastly less expensive than individual stock picking. Firms mimic index funds which, themselves, are created to mimic market strength. Not only do 85 percent of hedge fund managers trail returns in the S&P 500 but also they have underperformed for a decade.
John Bogle started the Vanguard 500 fund, tracking the Standard & Poor’s (S&P) 500 index, in 1977. It quickly grew to become one of the world’s largest funds.
Bogle’s fund always matched the market with minuscule fees due to the absence of expensive (and often incorrect) stock pickers. Therefore, there were also lower taxes due to lower capital gains because firms are seldom rotated in and out of the indexes.
John McQuown and David Booth of Wells Fargo also had an early index fund, in 1973, but it was open only to institutional clients.
“The greatest enemy of a good plan is the dream of a perfect plan. Stick to the good plan.”